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The ‘right’ level for the superannuation guarantee: identifying the key considerations
Author(s) -
Khemka Gaurav,
Tang Yifu,
Warren Geoffrey J.
Publication year - 2021
Publication title -
accounting and finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.645
H-Index - 49
eISSN - 1467-629X
pISSN - 0810-5391
DOI - 10.1111/acfi.12737
Subject(s) - pension , consumption (sociology) , welfare , economics , key (lock) , function (biology) , actuarial science , microeconomics , business , labour economics , econometrics , finance , computer science , market economy , social science , computer security , evolutionary biology , sociology , biology
We deploy a stochastic life‐cycle model to examine how the superannuation guarantee (SG) impacts on welfare for Australian superannuation fund members under a reference‐dependent utility function that evaluates consumption relative to target, allowing for existing superannuation, taxation and Age Pension eligibility rules. The analysis highlights how the optimal SG can vary substantially with pre‐retirement income, the post‐retirement consumption target and various other assumptions. We conclude that no single SG rate is appropriate for all members and suggest that the main reason for increasing the SG above 9.5 percent would be an aim of replacing the Age Pension where possible.